February 1, 2012


It seems very clear to me that from here on out Provectus is in a very fluid and dynamic situation. While I do not believe something, anything is imminent, I do think, by virtue of what management achieved in terms of breakthroughs in every major program last year and so far this year (melanoma, liver, dermatology, immunology) the company is much closer to the end-game (the acquisition of the company) than it has ever been.

I think the key to understanding management's thinking about the end-game is to understand how they view this journey. I do not think they ask themselves the question, "can we sell the company," which would suggest lower price expectations or price expectations based on what other CEOs and management teams and board of directors are willing to exit their respective situations.

Rather, I think Provectus management is engaged in a business decision: "for how much can we sell the company." As a result, this perspective requires management to assess what interim transactions are necessary or would (could) facilitate a much larger valuation for the full acquisition of the company.

Can vs. How much. These are two very different lines of thinking; two very different sets of tactics and strategies.

I'd like to expand on what I think could happen in terms of transactions.

Let's first establish the kinds of transactions:
  • A = a dermatology deal; the complete license/sale of this business, which is a separate/distinct therapeutic business from oncology
  • B(n) = a mini-oncology deal (1...n), whereby the company licenses PV-10 to treat a specific indication in a specific geography; one or two such deals are possible: MM in Australia or Australasia, and HCC (liver cancer) in China or Japan
  • C = a minority equity investment (by a pharmaceutical company such as, for example, Pfizer or Johnson & Johnson)
  • D = the complete acquisition of the company

Now, let's establish an order (which could be more likely than another) to the transactions:
  1. A, C, B, D.
    • Common to all of these potential or possible transaction flows is the sale or complete licensure of the dermatology business (PH-10).
    • I think a small equity investment -- 4-5 million shares issued/sold to a strategic partner (e.g., PFE, JNJ, another global pharma company) at $4-5 per share follows (the math here is, roughly, a $15-20 million investment at a $450-550 million post-money valuation [read: 3-3.5% dilution, assuming 113-114 million shares issued and outstanding]).
    • One or two mini-oncology deals.
    • The complete acquisition of the company.
  2. A, D.
    • A highly successful dermatology sale would (could) be the catalyst for the sale of the entire company because of the proof points that an "A" deal would establish: interest, value, valuation, demand, etc.
    • The wild card here, and more likely a very small probability of occurring, is the commencement of the auction process for the derm business acting as a catalyst to spur a global pharma such as Pfizer or Johnson & Johnson to acquire the entire company before Provectus gets too rich in terms of price or valuation.
  3. A, C or B, D.
    • An equity investment by a global pharma company or a limited oncology license might spur the eventual sale of the company for the same reason I wrote above: such sequential validation might start to dramatically raise the value of the company in a world of such scarce assets.

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